On Wednesday before the opening bell, Credit Suisse Group AG (NYSE:CS) reported its first quarter earnings and saw a 96 percent decline as it continues to battle against new regulatory requirements and economic challenges.
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Credit Suisse Group AG has been adjusting its business in response to the challenges and over the last few months, it has cut 3,500 investment banking jobs to cut costs. It has also been reducing and leaving sensitive businesses. Credit Suisse noted that its risk-weighted assets have fallen by more than a third, reported The New York Times, while it has increased wealth management bankers to bring in additional high-net-worth clients.
Credit Suisse’s CEO Brady W Dougan said of the changes, “Investing in our client franchise while at the same time reducing risks and tightly managing costs has been a priority for us.”
First Quarter Numbers
The company’s profit for the first quarter dropped to $44 million Swiss francs ($48 million) as compared to the previous year’s $1.1 billion francs. This came from a charge on its own debt’s value and decline in its investment banking arm. Net revenue fell to $5.9 billion francs from $7.8 billion francs.
Credit Suisse noted that its cost-cutting plans were on track but there was concern by analysts on whether the bank can continue with its reorganization while not affecting its earnings with the challenging market conditions.
Christian Stark, an analyst with CA Cheuvreux, said, “The challenges are to still reduce risk further. The first quarter made it easier to de-risk in a more favorable market environment. In April that changed and if the markets have become more difficult, then downsizing and derisking is harder.”
Even so, the bank did surpass analysts’ forecasts and improved from last quarter with its $637 million Swiss franc loss.
Credit Suisse saw increases in the quarter from fixed-income sales and trading, but its investment banking pretax profit dropped to $993 million francs from $1.5 billion francs in the previous year. When compared to 2011’s fourth quarter, the unit saw a pretax loss of $1.4 billion francs.
Dougan was happy with the company’s results and said in a press release, “We had a good start to 2012. We began to see the effects from the measures we announced in mid-2011 to evolve our business model and cost structure and we benefited from an improved market environment.”
Credit Suisse’s earnings came in after the other big banks already disclosed their quarterly earnings with much better numbers.
Earnings from the Big Banks
Goldman Sachs Group, Inc. (NYSE:GS) saw its earnings more than double in the first quarter, seeing its best quarter for U.S. stocks in years. It earned $2.1 billion ($3.92 per share), a rise from $908 million ($1.56 per share) from the previous year. This topped analysts’ estimates of $3.55 earnings per share.
Bank of America Corp (NYSE:BAC)’s first-quarter profit surpassed analysts’ forecasts thanks to a rebound in trading and improved credit quality. Profit, excluding some one-time items, jumped about 40 percent to $3.7 billion ($0.31 cents per diluted share), up from $2.6 billion ($0.23 cents) from the previous year. Net income, which included accounting charges, dropped to $653 million ($0.03 cents per share, from $2.05 billion ($0.17 cents).
JPMorgan Chase & Co. (NYSE:JPM) saw better than expected revenue growth in the first quarter thanks to improving credit conditions for consumers and rising demands for new loans from businesses and home buyers. The bank earned $1.31 per share in the first quarter as compared to the previous year’s $1.28 per share. Revenue increased six percent to $26.7 billion, up from $25.2 billion while its net income fell to $5.4 billion, from $5.6 billion.
Citigroup Inc. (NYSE:C)’s first quarter saw a slight profit from the previous year and exceeded analysts’ estimates after excluding charges from the bank’s own debt. The bank’s net income of $1.11 per share increased seven percent from the previous year and the $20.2 billion revenue increased one percent. Citgroup’s per-share number exceeded analysts estimates by $1.00.
Wells Fargo & Company (NYSE:WFC) reported a profit increase by 13 percent and earnings of $4.25 billion in the fourth quarter ($0.75 cents per share), up from $3.76 billion ($0.67 cents per share) from the previous year. Revenue increased 6.4 percent to $21.6 billion from $20.2 billion. Analysts had estimated $0.73 cents per share on $20.5 billion revenues.